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Corruption and SME's

20 February 2006--Corruption in the public and private sectors has been recognized as a leading problem for businesses both big and small all over the world. Not only does it distort unfair competition and create a negative impact on the quality of goods and services, bribe payments shift money away from potential productive investments. Corruption is bad for businesses of all types - multinational, local, large or small. It is however, the smaller firms that are more adversely affected.

Several initiatives by international and advocacy groups are working to address in particular the role of the private sector in corrupt practices. The objective is to create a discussion platform for various experts in the field and provide small and medium enterprises with knowledge and tools to cope with corruption. One such venue is the Expert group meeting on Small Business Development and Corruption to be held on 6-7 March 2006, sponsored by the UN Office on Drugs and Crime and the UNIDO.

An excerpt from the 2000 Enterprise Survey of the Transparent Accountable Governance Project is taken as reference.

Read the draft discussion paper




Guide to the BIR and BOC

14 February 2006—The Makati Business Club published two (2) handy guidebooks for doing transactions with the Bureau of Internal Revenue and the Bureau of Customs. The primers are part of an MBC initiative to institute transparent systems and good governance in the BIR and BOC.

The Bureau of Internal Revenue guide shows the basics of tax payment and collection. It provides readers with step-by-step procedures for paying individual, corporate and other business taxes. The Bureau of Customs handbook outlines the basic rules on importing and exporting, and the regulations on tax payments and duty-free privileges. It also contains procedures for establishing bonded warehouses. Readers are urged to report any act of extortion or bribery in the BIR and BOC. The primers were designed to emphasize the importance of paying taxes and the need to institute transparent systems to prevent corruption in these agencies.

For copies of “A Guide to the Bureau of Internal Revenue” and “A Guide to the Bureau of Customs”, please email e.gacusana@mbc.com.ph. Both are published by the Makati Business Club with support from the Prince of Wales International Business Leaders Forum (IBLF) and the UK Department for International Development.




Transparency International’s 2006 Global Corruption Report released

1 February 2006—The focus of Transparency International’s Global Corruption Report for 2006 is corruption in the global health care system.  Based on the report, corruption in the health sector deprives those most in need of essential medical care and helps spawn drug-resistant strains of deadly diseases. 

For the millions of poor held hostage by unethical providers, stamping out corruption in health care is a matter of life and death.  “Corruption in health care costs more than money.  When an infant dies during an operation because an adrenalin injection to restart her heart was actually just water, how do you put a price on that?” said Huguette Labelle, Chair of Transparency International.  “The price of corruption in health care is paid in human suffering.” 

The report sheds light on the global US$ 3 trillion health sector, exposing a maze of complex and opaque systems that are a fertile field for corruption.  While the majority of people employed in the sector perform their functions with diligence and integrity, there is evidence of bribery and fraud across the breadth of health services, from petty thievery and extortion to massive distortions of health policy and funding fed by payoffs to officials. 

To read the full report, visit http://www.transparency.org/news_room/in_focus/gcr_2006




Combating Corruption: Look Before You Leap
By Shah and Schacter 

 16 January 2006—In light of the global movement aimed at combating corruption, what accounts for slow progress is the one-formula approach others believe will apply to all cases. Combating Corruption: Look Before You Leap by Anwar Shah and Mark Schacter (IMF, 2004) discusses how getting the bigger picture on a country translates to the success of anti-corruption programs.

The article drives at the need to identify which types of corruption are rampant and the country-specific causes that foster bad governance.  Shah and Schacter identified three broad forms of corruption.  Petty administrative or bureaucratic corruption is the most basic type, when officials use their office to bribe, demand kickbacks and divert public funds. On a larger scale, the theft or misuse of vast amounts by state officials and their close associates and allies constitute grand corruption.  The third type, is known as state capture or influence peddling.  This is when collusion between private sector and public officials occur for their mutual private benefit.  Effectively, private sector “captures” the state by using the legislative, executive and judicial branches to advance its interests.   

Given the three broad forms of corruption, these types still vary according to country. Before programs are set in place to curb corruption, it is necessary to know the local factors that make a country vulnerable to corruption.  Key corruption drivers were identified from in-depth country studies on six developing countries. Countries covered by the study are Guatemala, Kenya, Latvia, Pakistan, the Philippines and Tanzania.  The following are the findings: 

  • When the legitimacy of the state as the guardian of the public interest is in question, this creates conditions ripe for corruption.  This becomes rampant when clientelism shapes the political landscape and the line between what is public and private is blurred. 

  • Corruption is also rampant where the rule of law is weekly embedded.  Laws and rules apply to some, while others are exempt.  A common manifestation of uneven application of the rule of law is when law enforcers become the first to break laws or once the judiciary ceases to be independent.

  • Institutions of accountability are ineffective in countries where corruption is high.  In places where corruption is low, monitoring mechanisms were found to be strong.

  • The commitment of national leaders to combating corruption is weak.    In societies where public sector corruption is endemic, it is safe to assume it is entrenched in the upper layers. In which case, higher public officials are less likely to initiate anti-corruption programs. 

 

Shar and Schacter also devised a model that puts developing countries under three broad categories.  This model reveals corruption as a fundamental governance failure. When the incidence of corruption is high for a country, quality of governance is poor, therefore anti-corruption efforts must be aimed at promoting good governance and getting fundamentals right.   

Incidence of corruption Quality of governance Priorities of anti-corruption efforts
High Poor Establish rule of law; strengthen institutions of participation and accountability; establish citizens’ charter, limit government intervention; implement economic policy reforms
Medium Fair Decentralize and reform economic policies and public management
Low Good Establish anti-corruption agencies; strengthen financial accountability; raise public and official awareness; encourage anti-bribery pledges; conduct high-profile prosecutions

It is well known that multilateral institutions are less likely to fund anti-corruption programs in countries where governance is weak. The article ends with suggested “entry points” to address governance-based drivers of corruption.  Developing countries can begin with these key efforts: service delivery performance, citizen empowerment, information dissemination, economic policy reform and involvement of other stakeholders, on which to ground a solid anti-corruption strategy. 

To read the full article, visit http://www.imf.org/external/pubs/ft/fandd/2004/12/pdf/shah.pdf.




Anti-Corruption Agencies and Organizations WorldWide

• United Nations Office on Drugs and Crime
• World Bank Institute
• Transparency International
• American Center for Democracy
• Institute of Public Administration
• Center for Democratic Institutions
• Center for International Private Enterprise (CIPE) (Washington, D.C.)
• Independent Commission Against Corruption (Australia)
• Independent Commission Against Corruption (Hong Kong)
• Nathansom Center for the Study of Organized Crime and Corruption
• American University’s Transnational Crime and Corruption Center (TraCCC)

Research and Discussion Papers on Corruption

Suggested readings

Alfiler, Ma. Concepcion P. “Administrative Measures Against Bureaucratic Corruption:
The Philippine Experience”, Philippine Journal of Public Administration. 1979.

Aquino, Belinda A.. “The Transnational Dynamics of the Marcos Plunder”.
Reprinted from Journal of Asian and African Studies. 1999.

__________. Politics of Plunder: The Philippines Under Marcos (Second Edition with an Epilogue). 1999.

Bautista, Victoria A. “Negative Bureaucratic Behavior in the Regulation of Taxicab Businesses: The Case of the Board of Transportation”, Philippine Journal of Public Administration. 1979.

__________. “The Nature, Causes and Extent of Corruption: A Review of Literature”, Philippine Journal of Public Administration. 1982.

Caiden, Gerald E. and Caiden, Naomi J.. “Administrative Corruption Revisited”, Philippine Journal of Public Administration. 1994.

Cariño, Ledivina V.. “Administrative Accountability: A Review of the Evolution, Meaning and Operationalization of a Key Concept in Public Administration”, Philippine Journal of Public Administration. 1983.

Cariño, Ledivina V.. “Bureaucratic Norms, Corruption and Development”, Philippine Journal of Public Administration. 1975.

__________. “The Definition of Graft and Corruption, and the Conflict of Ethics and Law”, Philippine Journal of Public Administration. 1979.

__________, ed.. Bureaucratic Corruption in Asia: Causes, Consequences, and Controls. 1986.

__________. “A History of Philippine Efforts Against Corruption”. Paper presented to the “International Workshop on Regulation and Governance of the University of the Philippines School of Economics and University of the Manchester Institute of Policy and Management”, Manila, March 29-30, 2000.

Cariño, Ledivina V. and de Guzman, Raul P. “Negative Bureaucratic Behavior in the Philippines: The Final Report of the IDRC Philippine Team”, Philippine Journal of Public Administration. 1979.

Cariño, Ledivina V.; Reyes, Danilo R.; and Tancangco, Luzviminda G.. “Pananagutan at Katiwalian: Koleksiyon ng mga Tala”. 1986.

Cariño, Ledivina V. and de Leon , Josie H.. “Final Report for the Study of Graft and Corruption, Red Tape and Inefficiency in Government”. 1986. Cariño, Ledivina V.; Iglesias, Gabrielle R.; and Mendoza, Ma. Fe V.. “Initiatives Against Corruption: The Philippine Case”. 1999.

Chua, Yvonne T.. Robbed: An Investigation of Corruption in Philippine Education. 1999.

Coronel, Sheila S. ed. Pork and Other Perks: Corruption and Governance in the Philippines. 1998.

de Guzman, Raul P.; Viñeza, Rizalino; and de Leon, Josie H. “Bureaucratic Behavior and Development: A Case Study of Supply Management in a Philippine Government Agency”, Philippine Journal of Public Administration. 1979.

Endriga, Jose N. “Historical Notes on Graft and Corruption in the Philippines”, Philippine Journal of Public Administration. 1979.

Faure, David. “Paying for Convenience: Corruption and Revenue Spending in Hong Kong”, Philippine Journal of Public Administration. 1980.

Florentino-Hofileña, Chay. News for Sale: The Corruption of the Philippine Media. co-published by the Center for Media Freedom and Responsibility. 1998.

Gaffud, Dolores L.. “The Employee Union as an Anti-Corruption Instrument”, Philippine Journal of Public Administration. 1994.

International Trade Centre UNCTAD/WTO. Report on the Proceedings of the Conference on Public Procurement Reform in Africa, November 30 - December 4, 1998.

Johnston, Michael. “Unpredictable Rules, Dishonest Competition and Corruption: Costs for Development and Good Governance”. Paper prepared for the Asian Development Bank and Organization for Economic Cooperation and Development conference on “Combating Corruption in Asian and Pacific Economies”, September 29, 1999.

Klitgaard, Robert; MacLean-Abaroa, Ronald; and Parris, H. Lindsey. “A Practical Approach to Dealing with Municipal Malfeasance”, Urban Management Programme Working Paper Series 7. 1996.

Le Vine, Victor T.. “Role Ambiguity and Corruption: Bureaucrat and Apparatchik in African Political Systems”, Philippine Journal of Public Administration. 1994.

Lo, Jack Man Keung. “Bureaucratic Corruption in China During the Reform Era: Current Issues and Future Decisions”, Philippine Journal of Public Administration. 1994.

Magtolis-Briones, Leonor. “Negative Bureaucratic Behavior and Development: The Case of the Bureau of Internal Revenue”, Philippine Journal of Public Administration. 1979.

Montinola, Gabriella. “Parties and Accountability in the Philippines”, Journal of Democracy, Vol. 10, No.3, January 1999.

Organization of Economic Co-operation and Development. “Convention on Combating Bribery of Foreign Public Officials in International Business Transactions” and related documents. Paris. 1998.

Political and Economic Risk Consultancy Ltd. “Corruption in Asia in 1999”, Excerpt from Asian Intelligence Issue #531. 1999. PERC Library.

Philippine Center for Investigative Journalism. Betrayals of the Public Trust: Investigative Reports on Corruption. 2000.

Reyes, Danilo R.. “Control Processes and Red Tape in Philippine Bureaucracy: Notes on Administrative Inefficiency”, Philippine Journal of Public Administration. 1982.

The World Bank. “Combating Corruption in the Philippines”. 2000.

United Nations Development Programme. Corruption and Good Governance: Discussion Paper 3. New York. 1997.

__________. “Fighting Corruption to Improve Governance”, Programme for Accountability and Transparency (PACT) Annual Report 1998., p. 14. New York. 1999.

United States Information Service. “Uncovering Corruption”, Speeches and Conference Declaration from “A Global Forum on Fighting Corruption: Safeguarding Integrity Among Justice and Security Officials, Washington, D.C. February 24-26, 1999.

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